Nifty Weekly Technical Outlook for 12 Oct’15

They say there are two sides to everything. But there is only one side to the stock market: and it is not the bull side or the bear side, but the right side. – Reminiscences of a Stock Operator

Isn’t it a Golden Rule of the stock market. We all are stuck with our own prejudices, some are hardcore bulls and some are happy to be Bears of the market, but real trick is to stay on the right side of the market. Essentially it tells us to be objective and not to get drive away with your own biases. Honestly it is very difficult to follow this simple discipline in the market, but if we don’t follow this rule then most of the time you find yourself in a situation when you don’t have any convincing trade to take, and if at all you are taking then it will be by force but not by choice-now force could be anything, it can be your boss, it can be your own psychological compulsion to always stay in a market or may be something else. And now with experience I can surely tell you that if you are convinced about any trade then you are not taking trade but you are betting in a casino without knowing any rules of the game i.e playing Blind.And why to play Blind when you can correct yourself. At Way2Profits my objective is always to play safe and conservative, as Money Saved is Money Earned, isn’t it.

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The week passed by…

Monday turned out to be a fantastic day for bulls as NF moved strength to strength, but rest all four sessions kept market participants in skepticism, as volatility kept traders on their toes. If we see weekly candle then it clear indicates positive bias, but most of the gain came in from Monday’s move.

Technically speaking, NF managed to fill the gap 8060-8225 created on 24 Aug’15, but that’s it, it just filled the gap and turned back, as selling pressure near the highs dragged NF again lower.

As depicted in attached chart, NF is hovering near its 200-DEMA (8184), and incidentally when NF has opened gap down it broke the support of its 200-DEMA and when it is filling the gap it is standing on the brink of its average, which clearly indicates its importance. Historically, if we see then since from 2012 NF stayed below its 200-DEMA for maximum time of 40-days and till date we have completed almost 33 sessions, and even if we see previous price behavior than in that case also in last 5-7 trading session NF was hovering near the average, that is what we are doing at this point in time. Based on this hypothesis may be for next week NF may remain sideways, and eventually surge higher.

Bank Nifty is also facing resistance of its 200-DEMA, but it failed to fill the gap with slightest margin.

Similar is the case with CNXAUTO, which is struggling near its 200-DEMA and not filled the major gap.

But if we see CNX IT Index which is sustaining well above its 200-DEMA and it has filled the gap very early in the last month only. We should also not forget that INFY is going to announce its results on Monday morning, followed by other major companies, which will set the trend for coming sessions. Similar is the case with CNX PHARMA Index.

If we see on standalone basis then CNX METAL was the star performer of the week, forming excellent reversal pattern, but looking at structurally bear move of past, we should take this as dead cat bounce from oversold territory, and play only for short term bounce.

Derivative Insights

In the month of October FII’s have infused capital of around 1500 crore.

Week on week basis FII’s have built 188274 contracts in future Index, while only 7581 contracts are shorts. So they bought almost worth of 4031 crores.

Interestingly if we observe Options build-up of FII’s only, then they are long call options 90849 contracts and Put longs are only 66444. At the same time they have unwound call short options to the tune of (-) 34481, while 122657 Put contracts are short build. This clearly indicates bullish bias to me, as they are building not only long contracts but they covering their call shorts and adding further in put shorts.

Last week’s review – I would prefer to stay long only above 7950, stop should be placed below 7880, looking for upside of 8050 and if NF manages to sustain above 8050 then 8200 would be next level to watch for. Expectations turned out to be in sacrosanct with market move

According to me, NF stands at a Inflexion point and that is the reason we are see such a high volatility in the market, because from here on one party will start dominating other. I expect in this week markets are likely to remain highly volatile, as nobody will turn out to be clear winner. Level specific, NF on sustaining above 8225 will target of 8325 levels and may be it can target for 8390-8400, but sustenance near this level is a big challenge. On the downside supports are placed near 8100, and till NF holds above this level, I prefer to stay long, if at all it corrects below 8000 then one think to create shorts, between 8100-8000 is neutral zone. I hope my point is clear; as mentioned in the beginning be on the right side.

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